Cash-loaded Goldman Sachs clients with more than $2m to wave around were told over the weekend that they would soon have the opportunity to invest in Facebook.
According to a report in the New York Times, the brokerage plans to offer its clients up to $1.5bn in Facebook Inc equity.
Goldman Sachs said in an email to would-be …

"got tagged with a valuation of $50bn"

Not quite

I think it's more likely to be "quantative easing", ie. freshly printed money that is driving this particular asset bubble but your point about pension cash being pissed up the wall on this kind of Ponzi scheme (what is the money for if not to pay earlier investors off?).

Proof if more proof were needed

Investors are complete idiots, just very rich complete idiots, often gambling with your money on a 'cant lose' basis - if they screw up you lose the money not them, if they get it right they scoop a massive commission from your profits....

Re: Worth at least twice as much...

Dividends

"Is Facebook actually making any money yet?"

FB are estimated to be making $2bn (yes, with a 'b') this year (source - Financial Times). That still makes a $50bn valuation way too high. Price to earnings (PE) ratio for companies can vary wildly, it's typically around 15, using this measure FB would be worth around $30bn. Companies expected to substantially increase their earnings usually have higher PE ratios up to the low twenties. A PE ratio of 25 or over as indicated by this deal would mean either investors are expecting an enormous increase in earnings growth, or (as seems more likely to me), it's a speculative bubble.

Dot Com Crash 2.0...

Boo

Does anyone remember Boo.com being valued at more than Rolls Royce or was it BA or BAE?

I find the valuation bizarre, not only because we've been there before (it was "different this time" last time too). Ah, the weightless economy...

Someone buying a slug of FB is not the same as all of it becoming available. We don't know the underpinning reason why Goldman (if it were) bought in but I don't imagine it was based on dividend stream projection.

Fools and their money ...

Valuations are not about real value...

They are about predicting what others will pay in the future - and when those stocks are released in 2013, current purchasers expect a profit from increased demand for the stock. hence the value is for the predicted purchase price of the stock, not the firm itself per se.

It's rather like investing in art - the physical value of the object is quite low; the price is based on what others will pay for it later on.

The difference, of course, is that a van Goch generally doesn't go tits up when it can't find a business model - but all the current investors are betting that won't happen until they have shed their stocks. Of course, someone will get burned if facebook fails, but everyone is hoping that won't happen... and until it does, the artifical inflation of stock values will continue.

Monopoly

Facebook is not another dot com boom to bust. Its a monopoly like eBay. Currently its not throwing its weight around because its still in the growth phase.

Facebook will be around for decades to come because of its critical mass. They do not have to invent a better search engine or make a better product. Everybody's data is already there and migrating hundreds of millions of people away is just never going to happen.

Investing the money now is a good idea for a serious long term venture. They will start to earn real hard cash when they start charging for membership, probably a gold members club with a shiny badge next to your picture (social people like bling). It will be like when ebay raise fees and everybody gets upset but still uses eBay.

Seriously has there ever been an event where 100 million people have all changed their mind within a short space of time?

Rot

If ebay raises their fees people will just move to the other auction sites that already exist.

If facebook tries to introduce fees it will empty of users as quickly as friends reunited did

Lets face it (sorry) facebook does NOTHING that you NEED, it is fun only because it costs NOTHING, when it costs something people will just go and find something else to do somewhere else. Facebook has ZERO real value.

This is legal?

Russian? Mafia? So...

... that is how Russian mafia gains some legit face(book). I guess is better than through achieving arguably suspect hosting of major events (Eurovision Song Contest, Winter Olympics, Soccer World Cup etc.

I don't...

...pretend to understand business and finance. Does any of this mean that Facebook is about to be vastly overinflated, then explode, sink and disappear without trace, so we can all get back to something approaching normal?

A British public exclusively focused solely on idiotic TV talent shows has to be marginally better than one focused on idiotic TV talent shows and Facebook.